3. Given the following financial data: Net income/Sales = 4 percent; Sales/Total assets = 3.5 times; Debt/Total assets = 60 percent; compute:

a. Return on assets.

b. Return on equity.

Du Pont analysis

4. Explain why in problem 3 return on equity was so much higher than return on assets.

5. A firm has assets of $1,800,000 and turns over its assets 2.5 times per year. Return on assets is 20 percent. What is its profit margin (return on sales)?

6. A firm has assets of $1,800,000 and turns over its assets 1.5 times per year. Return on assets is 25 percent. What is its profit margin (return on sales)?